The Post Crazy Economy

< em>I said God damn, The Pusher -Steppenwolf

I'm starting to feel guilty.

I don't have a sub-prime mortgage, credit cards or a car payment. My PDA is two years old and my television is three. Restaurants and books are the only categories where I spend more than the national average. I've never flipped a condo.

The recent economy was based on all the things I don't do.

Now a lot of people are joining my ranks. I saw a Wall Street Journal article headlined, "New Frugality Worsens Downtown".

It's as if The Powers That Be are unhappy that consumers are getting their act together.

It's similar to a dope dealer getting angry when a customer goes into rehab.

To some, the crisis was caused by consumers. Not by the greedy bankers on Wall Street and their friends in Washington. Not a decade of terrible leadership from the Federal Reserve. Not the lobbyists who pushed legislation that let corporations run wild.

No, the economic crisis was our fault. They want to blame those of us who managed some sanity while everyone else was going crazy.

I think the crazy ones are those who are waiting for consumers to go wild again. It is going to take a few years. In fact, it may take a few decades.

We are entering the post crazy economy.

Even before the $700 Billion bailout of Wall Street fat cats, it was obvious that Washington didn't get it. When we first started into an economic downturn in 2007, the response was to waste hundreds of billions on stimulus checks.

The only thing they stimulated was the deficit, followed by an economic crisis a few months later.

Now, good savings habits are suddenly cool. It's like all of us are rushing to frugality.

No one is wowed by your shiny new car and big house. They are all wondering how you can pay for it. When someone tells me they are going on a shopping spree, I feel sorry for them. I wonder if they will be paying off the spree twenty years from now.

A lot of people think this is a temporary downturn. They think we will get through this crisis and go back to spending like it was 2005.

I don't think so. This is like the shock that our grandparents felt with the Great Depression.

My grandmother worked in a potato chip factory. She never had a car, credit cards or designer anything. She also never had debt. She managed to save money on a very meager salary.

It wasn't a bad lesson to learn. There have been a few blips in history where people have spent like crazy, but, for the most part, people historically lived on what they earned. Credit cards and sub-prime are relatively new ideas that haven't really worked out.

We are headed back to our grandparents' way of thinking. The rest of the world has already beaten us to it. The United States has one of the worst savings rates in the world and it will be hard to compete until we catch up.

People who built companies based on crazed spending may have to rethink their business models. No one is going to feel sorry for a sub-prime mortgage broker or a credit card company going under.

People are going to look at them the same way society looks at drug pushers: Businesses that enabled users to get completely out of control.

Once we completely say, "God Damn" to the credit pushers, we will be on our way to a successful post-crazy economy.

Like any time an addict recovers, the world will be better for it.

Don McNay, CLU, ChFC, MSFS, CSSC is the founder of McNay Settlement Group in Richmond, Kentucky. He is an award winning, syndicated financial columnist and the author of two books. You can write to him at [e-mail] or read his previous columns at www.donmcnay.com. Don is Treasurer of the National Society of Newspaper Columnists.

Comments

[MilwaukeeDan]

Mr. McNay, one of the sanest articles I have read in quite a while. Maybe the people are getting more frugal, too bad the government is "going wild" with spending. They just don't get it. This country needs real jobs(manufacturing) with real pay, until then, we are headed off a cliff.

[marijam]

We saw this coming four years ago when we first tried to sell a house in a state that we used to live in, before we were forced to move to find work. Then we knew it was worsening when we put it back on the market two years later and never got one offer, even though the local industry was supposed to be "needing workers".

If we are in credit card debt up to our eyeballs, it's because we kept thinking, "Just one more month on the market and the house will sell." It never did. Now, we can't even rent it out.

Fortunately, I have my job and my husband still has his. We meet our obligations every month. In half a year or so, we'll be able to pay off the credit card debt. After that, never again. Until then, we are living very frugally because we've got two mortgage payments and a vehicle payment that is the equivalent of a mortgage payment.

[americaforme]

The hand writing wasn't on the wall it was in the USA Post Office, where unsolicited credit lines and cards bankrupt our nation. Mailed to anyone who had a pulse, and told by the pres. to spend , spend, spend. The chickens came home to roost. No economy can survive on such blantant unsupervised deregulation. Everyone is responsible, the haves, and the have nots. Be patient the mail is still bombarded with credit applications.

[Don McNay - Huffpost Blogger]

I have myself on every possible list to stop me from getting credit card applications but I still get a couple each week. My college student nephew gets hundreds. I get angry every time I see them.

[truthforme]

And I would add no economy can survive that is so heavily dependent on consumer spending for "economic growth."

For years my husband and I have been scratching our heads trying to figure out how our economy can continue to "grow" as the American consumer slipped further and further in to debt.

[taikan]

You can damn the pushers (whether of drugs or easy credit) all you want, but the fact remains that they wouldn't exist unless a large enough group of people wanted what they are selling.

Even assuming people do swear off easy credit for a while, at least for everyone other than government which is planning to borrow astronomical sums even though there may be no "pusher" for that credit, it will be interesting to see how long that lasts. After all, many of the Boomers fell for easy credit even though their parents lived through the Depression.

[Nancyok]

This crisis goes way beyond the ones that have been irresponsible. I've never had credit card debt or subprime mortgage. I put myself through college, masters degree, invested pragmatically and not lived beyond our means. We worked hard and had a mortgage we could easily afford with my hubby's good auto job and the business I built. We bought a house we could afford. We did carve into savings in the last 5 years to adopt our children.

In the space of a year, his income declined 30% and his job ends in weeks with hardly a nibble on his excellent resume. No one is buying tickets to live shows and my clients in arts industry have all lost sponsors and municipal funds, so even though I'm tops in my industry segment, my industry is down 60% already, so I'm just making payroll. The business I built over years is unsellable in this economy and I'm working for free. Our household income has plummeted over 50% in a year and our investments tumbled.

I don't think we contributed to the problem...We've lived well, but we've made smart choices and worked incredibly hard, but with the mortgage we could easily afford before, what's left of our savings will last a year. We'd like to sell and move smaller, but with the housing market plunge, our house is worth less than we paid, so we'd lose most of our 18 years of mortgage equity just to pay off the mortgage.

[exkiodexian]

A agree with you, that you didn't contribute to the problem. You're one of the responsible people being adversely affected through no fault of your own. To add insult to injury - YOUR tax dollars are being given free and clear to the crooks who so arrogantly brought down the house.

[Chaimirija]

Nancy, stories like yours are the worst part of all of this. Try to be positive; I know I am...

[exkiodexian]

Amen.

There's a concept that's so old it's new: "Living Within Your Means".

Americans are now going to be forced to live with that concept. It's unfortunate that it came to this as many lives are being, if not destroyed, then severely damaged by the irresponsibility of so many.

[WorkingClass]

Here is another concept thats likely to catch on among Americans. Living within your borders.

[blood1]

Thanks for putting in print this message. There are lots of Americans that have acted responsibly and they should be recognized. Is not it time for the US to reconsider it's position on all the outsourcing of manufacturing GOODs? Obama can spend all the money he can garner on infrastructure, education, etc...but if there are no "real" jobs after all that spending, then is not he just "kicking the can" down the road?

Don't get me wrong, something needs to be done about the mortgage meltdown...but the problem should not be solved by giving more money to banks to prop up their bottom lines as they write off their own bad investments...as Paulsen has already done that and appears to be prepared to do so again. As I am not an economist, I don't know if all those in the throes of foreclosure could benefit from refinanced mortgages if they don't have a job to pay for any mortgage. What is needed are jobs, jobs that have a shelf life of more than 2 years!

[citizenfirst]

"What are needed are jobs, jobs that have a shelf life of more than 2 years" I couldn't agree with you more, but for that to happen, a major reevaluation of human worth is long overdue in this country. All too often, in recent years, we have allowed corporations to commodify every facet of the labor force, without any penalties or restrictions. Part of the reason that citizens have stopped spending is that there is increasing awareness that their lives are of little concern to their bosses, let alone their leaders in Washington who could care less about whether or not they can put food on the table for their families. The corporate bailouts are just more "salt in the wound" for the average American. So now, the thinking goes: Why should we "reward" corporations, or the overall economy, by spending our hard-earned dollars, when nobody gives a rat's ass about us, our families, or whether or not we'll have a job in the future.